Misconception Number 1: Insurance Protects You
Real estate investors may be under the false assumption that a general liability insurance policy is all they need to protect their assets. However, this couldn’t be more wrong – taking the right steps towards asset protection involves much more than just one type of coverage.
Insurance is an important part of protecting your assets, but it isn’t the only factor. When signing up for a plan be sure to ask about any exclusions that may affect you; insurance companies will often add them as ways to minimize their own losses and secure their profits- just like you want yours.
Most people tend to overlook the fine print in insurance contracts due to their complex legalese, which can contribute to feeling unprotected. Ironically this unread information actually prohibits policyholders from suing for certain reasons outlined as “exclusions”, such as fires caused by microwaves and – believe it or not – volcanic eruptions!
While liability insurance can protect you from a potential slip and fall, it may not cover everything if faced with an impending lawsuit. This is why the right asset protection strategy should be put in place; one that involves smart contracts along with legal entities such as LLCs, Trusts, and Corporations to ensure maximum coverage during these uncertain times.
Misconception Number 2: Forming A Legal Entity Guarantees Your Protection
While forming a legal entity can offer certain protections to businesses, it’s important to remember that these only apply when the business is structured and managed correctly. Otherwise, despite being part of an LLC or Corporation, individuals may still be held liable for their actions.
Forming an LLC provides a layer of legal protection for you and your business’s assets, so it is important to take the extra steps in order to ensure that separation. Avoid any co-mingling between personal expenses or accounts and those dedicated solely to your company; otherwise not only will it make recordkeeping more difficult but could open up unexpected risks like losing access to personal funds if sued by a plaintiff. Ultimately, keep accurate records of all transactions related exclusively toward growing your entity, allowing yourself greater peace of mind knowing everything remains properly separated from outside influence.
Misconception Number 3: An Asset Protection Strategy Can Be Put In Place Later And Still Protect You
Often, real estate investors seek to safeguard their assets after they’ve been sued. Unfortunately, at that point it’s too late – asset protection must be established before litigation commences as transferring properties during a lawsuit can actually land you in legal hot water.